Ref: 220-22-12.1

January 2023

Start-up investments

OEMs are changing who
and how they invest in
10-minute InsightIn their race to transform themselves and their businesses,
major car makers have invested in, or acquired, almost 700
companies since 2016.
Looking ahead, while outright acquisitions are declining, thecurrent volume of OEM-supported/led investment deals is
likely to continue rising. Why? Because the capabilities
required to remain competitive are becoming harder todevelop exclusively in-house.
In this insight we explore the major trends OEMs arefocusing their investments efforts around, and what theyneed to do in order to ensure these deals deliver a clear
strategic gain.

Target audience
Engineering / Strategy

Focus market(s)GlobalMarketing/ Product Planning1

What is happening?
120# of investments & acquisitions by OEMs

Key takeaway
While the number of outrightacquisitions made by OEMs has
declined over the last five years,
OEMs are making more strategic
investments than ever before.

100• Most car makers have now set up
Venture teams to invest in or acquire
start-ups, and these teams have been
busy. Despite a dip during thePandemic, the last 2 years have seena record number of investments.

80• In addition to filling gaps in IP or
creating more supply chain certainty,
OEMs have embraced a ‘Try-beforeyou-buy’ approach to investing in newcompanies.

60

40• Despite a growth in overall activity,
however, outright acquisitions are
rarer today than five years ago. Why?
Partly because cash is tightening, butalso because of the limited successmany have had in integrating teams
and cultures from acquiredcompanies.

20

0

2016

2017

2018

2019

2020

2021

2022
2

Why does it matter?

Declining

Momentum
SteadyGrowing

Key takeaway
VTOLs

Manufacturing

EV Batteries

Satellite Tech

3D Printing

FinTechCyber
Blockchain

Sustainability

Micromobility

Vehicle connectivity

Fleet mobility

Data analytics

Maintenance & Parts
Chipsets Adv. Materials

Cloud services

SBD has analysed the underlying
trends driving this growth ininvestments to understand where
OEMs are focusing their efforts.

Autonomous vehicles• Other growth trends point to lessobvious focus areas for OEMs:
FinTech to help modernise how
vehicle purchases are made; satellite
technology to help scale up
localization or OTA strategies; 3D
printing to help modernise how car
parts are manufactured.

Professional services
Smart cities UX
Charging infrastructure

Shared Mobility

Online retail

Health & Wellbeing• Some of the trends are selfexplanatory: The pressure to deploy
EVs is leading to more investments inbattery start-ups, as well ascompanies in the broader
sustainability eco-system.

• On the other end of the spectrum,
OEMs are investing less of their VC
funds in areas they’ve struggled toscale (e.g. shared mobility) or areasthat are becoming commoditised (e.g.
charging infrastructure)

1-3

4-7
Investments per year

>73

Where next?
Key takeaway

1

Risk of global recessions reduces
appetite for investments &acquisitions

Globalrecession?

Investments
vs acquisitions

FutureOutlookHighsupply/demandtrendsGrowth ofacquisitions

2

OEMs continue to focus on
investments, rather than acquisitions,reflecting their cautiousness

3

Certain areas like AVs attract more
attention as smaller start-ups struggle
to keep up with larger players

4OEMs will continue relying heavily on
investments (and increasingly on
acquisitions) to keep up with breadth oftechnological innovation

5

All eyes will be on disruptors like Tech
giants, who will play an increasingly
pivotal role and have a proven track recordof acquiring talent/technology.

Eyes onTech
Giants

1-3yrs3-5yrsAn uncertain global economy andgrowing interest rates are likely toslow down investments andacquisitions across the automotive
industry over the next 1-2 years.
• OEM-led acquisitions in particular are
likely to dwindle, as OEMs continue to
opt towards casting a wide net forsmaller catch rather targeting bigger
fish. Certain trends like AVs may stillsee a growth in acquisitions as
smaller players struggle to raise
investment funds and OEMs look to fillholes in their capabilities.
• In the mid-term, however, thecontinued breadth of emerging trends(e.g. Blockchain, Quantum
computing, Smart materials)
makes it difficult for OEMs to remaincompetitive without investments andacquisitions.

• Beyond OEMs, tracking investments
and acquisitions among incoming
disruptors like Tech Giants will also
become more important.

>5yrs
4

Who to watch out for?
Key takeaway

Funding
Stage

Over 50% of investments andacquisitions across all OEMs havebeen made by three players: Toyota,
BMW and Volkswagen.

Number ofinvestments

Investment
cycle

Investment
Type● Seed / ● A-C Series / ● >C Series● Acquisition / ● Lead investor / ● Investor

148
102

101
70
55

51

45
27

21

18

13

6

8

• Toyota in particular has been highly
active among OEMs, with 148
investments and acquisitions madesince 2016.
• OEMs strategies differ by investment
cycles (OEMs like Toyota, Hyundai
and Ford are on a downward trend),
investment types (disruptor OEMs
are more likely to focus on outrightacquisitions) and the funding stageof start-ups (Mercedes-Benz is themost likely among established OEMs
to focus on >C Series funding rounds)• One important reminder: More does
not equal better – the large numberof investments made by certain OEMs
sometimes reflects disjointed
decision-making across a large
number of subsidiaries, rather than acoordinated effort to ‘own’ large partsof the eco-system.
5

How should you react?

12
3

Capitalizing
An uncertain economic outlook creates bothchallenges and opportunities – OEMs with
sufficient cash will be in a great position tohunt for strategic deals as start-ups struggle
to raise new funds from increasingly cautious
investors (although many investors continue
to be flush with cash that needs investing).

Consolidating
Decentralised decision-making for investments
among many OEMs is driving inefficiency.
OEMs that focus their VC budgets into asmaller number of strategic investments are
more likely to succeed, but this will require
investment decisions to become more heavily
centralised globally and across subsidiaries.

Engaging
Whether investing or acquiring start-ups,
OEMs still have work to do to improveengagement and alignment with their new
partners. Measurable KPIs beyond IRR are
required to ensure the ‘strategic’ part of any
deal is delivered (e.g. % of deals that result in
new tech launches among OEMs within X
years)

Authors
Andrew Hart
CEO

Related SBD Reports
Ref:201
Innovation
Guide

Ref:202
Start-up
Tracker

Related SBD Consultancy▪ Due Diligence▪ Market Forecasting▪ IP Analysis▪ Innovation Planning▪ Partner Strategies

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